CURRENCY MARKET WRAP
As of Tue Aug 6th, Singapore Time zone UTC+8
Dollar Index -0.89%, 97.22
USDJPY, -0.91%, $105.61
EURUSD, +1.20%, $1.1243
GBPUSD, +0.01%, $1.2157
USDCAD, +0.06%, $1.3214
AUDUSD, -0.55%, $0.6762
NZDUSD, +0.22%, $0.6557
Monday’s session began noticeably lower after China allowed the RMB to weaken beyond 7 per U.S. dollar in response to Trump’s tariff threat.Global equities declined sharply, and the selling carried over into U.S. equities, which steadily declined throughout the session.
Trump expressed his discontent on the “currency manipulation,” while the People’s Bank of China Governor, Yi Gang, said the central bank will not engage in competitive devaluation. China also said its companies agreed to suspend new agricultural purchases from the U.S.
Following the plunge in the yuan overnight, The U.S. Treasury Department on Monday designated China as currency manipulator, a historic move that no White House had exercised since the Clinton administration. “Secretary Mnuchin, under the auspices of President Trump, has today determined that China is a Currency Manipulator,” the Treasury Department said in a release. As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions.
The implied likelihood for a 50-basis points rate cut at the September FOMC meeting climbed to 23.5% versus 1.5% on Friday, according to the CME FedWatch Tool. Expectations for the Fed to step up its easing efforts amid increased risks to the economic outlook expounded the flight-to-safety in U.S. Treasuries. On a related note, all of Germany’s sovereign debt yielded negative rates for the first time on Monday.(Germany Bund 2 Year Yield, -0.82%, 5 Year Yield, -0.76%, 10 Year Yield, -0.52%, 30 Year Yield, -0.01%)
The U.S. 2-yr yield dropped 13 basis points to 1.58%, and the U.S. 10-yr yield dropped 12 basis points to 1.74%. The U.S. Dollar Index fell 0.89% to 97.22. WTI crude lost 2.0% to $54.64/bbl. Separately, gold futures settled 1.2% higher at $1467.20/oz, further helped by weakness in the dollar and declining U.S. Treasury yields.
STOCK MARKET WRAP
S&P500, -2.98%, 2,844.74
Nasdaq, -3.47%, 7,726.04
Nikkei Futures, -4.12%, 20,023.0
Stock market had its worst day of 2019 with each of the major U.S. indices losing around 3% on Monday. Trade and growth concerns rattled capital markets after China devalued the yuan to its weakest level against the dollar since 2008. The Dow Jones Industrial Average fell 2.9%, the Nasdaq Composite fell 3.47%, and the Russell 2000 fell 3.0%.
It was clearly risk-off on Wall Street with all 11 S&P 500 sectors finishing with steep losses. Eight sectors finished with losses between 2.3% (health care) and 4.1% (information technology). The tech sector was pressured by shares of Apple (AAPL 193.34, -10.68, -5.2%)and semiconductor companies, many of which derive a large portion of their revenue from China. The Philadelphia Semiconductor Index dropped 4.4%.